Credit Scores and Vehicle Financing

Mr_Shiftright

It makes no sense for dealers to sell their cars any cheaper than they are already selling them today. The margins are tight enough. Go any lower, and the dealer might as well fold up the tent and let the creditors fight it out then just go through the motions of running a non-profit enterprise.

I wouldn't budge if I were a dealer right now. Let everyone else cut each other's throats. I'd spiff up service, advertise, do more cost-control, whatever, but not cut the margin anymore.

boomchek

That's what we're doing actually. Cost control, running on smaller margins, butr we're NOT giving cars away.

volvomax

That's what we're doing actually. Cost control, running on smaller margins, butr we're NOT giving cars away.

Same here. It cracks me up that people walk in and go "But, the economy is bad".
As if that's a good reason to lose money.

fezo

Of course. You lose money on each unit but make it up with volume.... (where the heck is the rolleyes when you need it?)

boom and lr - sounds like you guys have the formula.

tidester

As if that's a good reason to lose money.

I don't think anyone is suggesting that you sell at a (real) loss but are you folks saying that your profit margins were so razor thin in good times that there is simply zero slack in the current market?

tidester, host
SUVs and Smart Shopper

Mr_Shiftright

Oh I think that the idea of the dealer selling at a real loss is definitely on *some* buyer's minds--at least this was my impression---and "the boys" here are attempting to disavow people of that hope. Some buyers might be hoping for a kind of distress sale scenario to unfold amid the burning temples and crumbling walls of Rome :P

volvomax

Oh I think that the idea of the dealer selling at a real loss is definitely on *some* buyer's minds--at least this was my impression---and "the boys" here are attempting to disavow people of that hope. Some buyers might be hoping for a kind of distress sale scenario to unfold amid the burning temples and crumbling walls of Rome

Bingo.

volvomax

I don't think anyone is suggesting that you sell at a (real) loss but are you folks saying that your profit margins were so razor thin in good times that there is simply zero slack in the current market?

Unless you are selling Porsche's or the like, your profit margin is thin in the best of times.
The problem today is all the doom and gloom that the media pumps out have given consumers an unrealistic expectation of the market.
Even if you can take $10,000 off a new car(thanks to rebates) a customer walks in and wants ANOTHER $10,000 off. No way to make a deal there.

lokki

I'm sure that this has always been a problem but how does a salesman determine who can obtain financing nowadays and who won't be able to before you invest 1000 hours in a transaction that's doomed to fail?

Or has the situation improved to where it's possible for average Joes like the undersigned to get loans again? I guess, to be precise, what kind of credit score are you going to need to be able to get a $20K loan towards a $30 K car?

boomchek

The way we do things at our Chrysler dealer is we pre approve anyone and everyone who may think that their credit is not perfect.

A lot of folks come in and even ask to get pre approved before hand.

This lets us determine if someone is financeable or not.

Usually fico scores below 500 are not doable, 500-600 will be subprime with 15-29% apr, and may qualify for a $10-$20k car, and above 600 will be close to prime but still dependent if there's any collections or detrmintal stuff on file or not, and how much debt one carries. At times you can have decent fico scores but carry a ton of debt, so you might not get approved cause your debt service is too high.

fezo

15 - 29%!!!

And yet these people buy anyway...

boomchek

Some people are unfortunately stuck in crappy situation and really do need a car so they do end up paying 29% apr on their car loans.

There's also those that don't care what their APR is as long as they have a flashy car.

And then there are others who wish they could get approved even at 29% apr who had auto repos less than a year before applying with us, and who applied literally everywhere for a loan, and who even have collections for things like $20 bounced checks, payday loan places, telephone and cable bills, etc. They're just really really not very good with their finances in general.

Mr_Shiftright

How do such people keep from having their lives just explode? You can't juggle that many balls in the air for too long.

boomchek

Some do end up paying their cars on time and slowly fixing their credit. Others just go through this cycle every 6-7 years, by messing up their credit, waiting for it to "heal" 7 years later, then buying stuff again and not paying for them and so on.....

volvomax

I'm sure that this has always been a problem but how does a salesman determine who can obtain financing nowadays and who won't be able to before you invest 1000 hours in a transaction that's doomed to fail?

As boom said, you pre-qualify everyone you can.
A good salesman can also ask the right questions, its called "qualifying"

snakeweasel

And yet these people buy anyway...

OK answer me this, what would you rather do, pay 15-29% or walk everywhere?

tidester

I would opt for walking or using public transportation before paying 29%.

tidester, host
SUVs and Smart Shopper

snakeweasel

I would opt for the 29% as just walking to work would be 4 hours one way, Public transportation would be just as long. I would pay the additional 150 a month to save wear and tear on my feet.

Mr_Shiftright

Where I live, if a person had a professional job, they'd get to work by public transportation just about the time I'm ready for my lunch break. On a more serious note, it takes 3+ hours to go 85 miles to San Francisco and requires three buses and a train, or two buses and a brisk 10 block walk to SF Financial District. 6 hours a day commute (if things go WELL)? That 29% might not look so bad.

And let's rub salt in the wound. The trip by car takes 1.15 and probably costs less.

oldfarmer50

"...it's called "qualifying"..."

My experience with my last car purchase was that the salesman had already "qualified" me as a deadbeat as soon as I walked in. What questions should I expect in this process so I can be ready with the information a salesman needs.

I really didn't like having to drop my 800 FICO score on his desk to get him interested. Should I come in with hundred dollar bills hanging out of my pockets? What are they looking for? :confuse:

padres

Though I said I've waited two years, I've been ready to buy for the last 18 months. I have a specific truck and color that I want. I wasn't able to find it and had dealers check for me before and during last years "red tag" sale but the truck couldn't be located. The truck is available in about seven locations at this time.

I don't know that my expectations are too high but I won't accept a "take it or leave it" attitude. When I inquired last week about a truck and wanted a clarification, the dealer answered my question. He also told me the MSRP was $54,,,+ but they reduced it to $51,300 and then took off the $3,500 rebate. The price was $47,700+ and "you better hurry". The truck has been on their lot for four months at least, so I'm not hopping on the next plane to get there in time.

verdugo

Though I said I've waited two years, I've been ready to buy for the last 18 months. I have a specific truck and color that I want. I wasn't able to find it and had dealers check for me before and during last years "red tag" sale but the truck couldn't be located. The truck is available in about seven locations at this time.

:confuse: I don't get it. Was there a reason you couldn't do a factory order and still get a decent price?

IMHO, if you haven't been able to get the TRUCK you wanted in the past 18 monhts with all the crazyness going on (first gas prices, now economy), something tells me that the issue is with you rather than the dealers' "take it or leave it" attitude.

Maybe your expectations are not realistic? Like salespeople have said many times around here, just b/c the economy is bad, you don't give the cars away.

Best of luck! Let us know what you end up doing.

joel0622

As the old saying goes "Don't judge till you have walked a mile in there shoes"

Allot of people here cannot fathom the lives some people have and the crappy hands life has delt them.

There are some people who have caused there own problems by being irresponsible, then there are those who have had there life spiral no fault of there own.

Tell the divorced mom with 3 kids a dead beat dad, and two jobs to use public transportation or walk. it just does not work.

There are people who deserve the break but have to pay for it. Lending is like insurance. If I have two DUI's I can still get insurance but going to pay for it because I am a high risk

boomchek

Should I come in with hundred dollar bills hanging out of my pockets? What are they looking for?

You ran into an inexperienced salesperson, that's all. Nothing you could have done differently that would have changed anything, other than dealing with someone more knowledgeable in qualifying customers properly.

boomchek

so I'm not hopping on the next plane to get there in time.

Isn't that ther price you were wanting to get?

I think I see why you haven't bought what you wanted in 18 months. If the dealer has the exact truck you want, and they gave you a price, what you have to do now is make a counter offer and see if they accept it. If they do, leave a deposit on it and go pick it up. If not and you're thousands of dollars apart, then you have either readjust your budget, or buy a lower model, or keep waiting until there are more rebates on them, but that could take another year or two, by which time your truck might not be produced any more.

mitchflorida

Next time, go into the dealership wearing a business shirt and tie, and some nice slacks -- instead of the torn T-shirt, shorts and sandals that you wore last time.

al_2003

My understanding is that GMAC recently announced that they are accepting applications for sub-620 credit scores, and Ford Credit is doing the same. Competition being what it is (even in this market) I expect that other lenders should also be loosening their underwriting requirements some as well in the near future.

Has anyone had any experience with this yet?

fezo

If that's what the sales guy is looking for he's making a mistake. We used to have this real oddball of a millionaire in these parts. Loads of folks knew him but the person at the BMW dealership who was supposed to take the next up didn't. He showed up in a bath robe and my neighbor who worked there figured "what the heck" and went out to greet him. He bought six cars that morning - new 5 series BMWs.

You never know.

joel0622

Ford Credit never stopped. I see no difference today in getting someone approved then a a month or even a year ago at Ford Credit. Now with the banks it is a different story, they have tightned up quite a bit.

If any make wants to stay in business they better get with the program and learn how to buy questionable paper. If they think it is bad now wait till a year or two has passed and all of this has blown over. There will be 3 times as many people out there with questionable credit as there are now.

Think about this, everyone here probably knows someone who has been effected by the current economy. Good people who got up everyday, went to work and paid there bills. Now no fault of there own they have lost a job, maybe even a house. In a year or two those people are going to be established again and are going to want to buy a car. There 750 credit scores are now 550. Sub Prime is fixing to go crazy here in the near future.

That is just my humble opinion.

Mr_Shiftright

If the dealer lets you walk away from a deal, then your offer is too low. It couldn't be simpler than that if you really evaluate what is going on here.

Every sales situation is, in a sense, a betting game. You are betting the dealer will take your offer, and the dealer is betting he can get someone to pay more.

So if both of you have lost the bet, then you have to come up a little and the dealer has to come down a little, or the status quo will go on ad infinitum.

mitchflorida

For every story like that, there are 100 stories of young people going into the dealership dressed like they are going to the beach.

I think anyone dressed neatly and professionally will get treated properly, no matter how much or little a person has in his checking account.

I personally would probably call the police if someone came in the showroom wearing a bathrobe and slippers. Hopefully he was wearing something under his bathrobe.

verdugo

Joel,

Good to have you back posting more frequently. I've always enjoyed your posts.

joel0622

Thanks, I usually hang around until some riff raff shows up then go away until you all run them off

fezo

You know, I don't know if I asked about anything under the bath robe.... The guy has since passed but he was a character.

I'm sure you wouldn't do well if you figured everybody dressed like that was a sale...

Of course i knew a guy who used to dress nice and say his dad (he was in his early 20s at the time) was going to buy him a V-12 car for college graduation as a way of getting test drives. He got quite a few. He was a complete waste of anyone's time but he had his fun.

snakeweasel

The best dressing guy I know, the one who dresses sharp with brand names clothes, the one you would look at and say "now there is a sucessfull guy" makes about $18k/ year.

The richest guy I know, the guy who could pay cash for any dealership represented here drives a 10 year old Ford and looks like a bum.

Never judge a book by its cover.

mitchflorida

the issue isn't money, the issue is respect for the salesman. Who wants to help someone who is dressed like a slob and probably hasn't showered in days?

snakeweasel

Well when I was in sales the one thing that I cared for was if the person could and would buy. Didn't care if s/he dressed like a slob their money spent the same.

oldfarmer50

"... instead of the torn T-shirt, shorts and sandals that you wore..."

Since I last bought in January that outfit would indeed have been out of place. As it was I was wearing jeans, flannel shirt and a ski parka which is what I was wearing at work that day. If I have to dress up like I'm going to the senior prom to buy a car then I'll look elsewhere.

My original question was what information can I provide so that the salesman can qualify me as a serious potential buyer. If you're saying that all a salesman cares about is my appearance, I guess there is nothing I can do to help them.

boomchek

Oldfarmer, it wasn't you that did anything wrong as I mentioned in my original repsonse to this. You just ran into a newbie salesman who didn't know how to qualify properly.

volvomax

In a lot of cases, customers tend to be closed mouth about what they are looking for, when they plan to buy, how they plan to buy and how much they want to spend.
A salesman who gets one of these customers tends to lose interest quickly.

My advice is to be as open as possible. Let the salesman know when you plan to buy, if you are pre-approved, answer his/her questions as directly as possible.

oldfarmer50

"...You just ran into a newbie..."

Well, he was at this same dealership for at least 2 years that I know of. He was the one I had talked to when this particular model first came out in 2006. He was helpful at that time so I made a point of going to him 2 years later when I was a serious buyer.

Any way, it all worked out for both of us as I did buy...and I bought TODAY (meaning I did the test drive, the haggle and the purchase all on the same day).

mcb345

I am applying for a TSX lease within the next month. I have a credit score just above 700 and have always paid my credit cards and student loans on time. My downfall is my debt/credit ratio is currently around 40% as I slowly pay off two remaining credit cards from college expenses. My debt to income ratio is likely around 30%. I read that under 30% for your debt-income ratio is considered good and that over 660 on your credit score should be fine in order to obtain a lease. What worries me is the 40% debt-credit ratio though, where my debt to credit cards is around $1800 with credit limit of $4200. I have a small amount of money in stocks but dont' want to pay off credit cards that only charge me 10% when I'm earning 25%+ in the market right now. I also want this "cash" available to me if i truly need it down the road. With a debt-credit ratio that high and student loans of about $19,000 still and a salary aruond 65k, would I be approved for a $27k lease on an Acura TSX with 0 down and payments of $348/month or is there a good chance I'll be denied? Also, if I could manage to get a co-signer would that solidify my chances of being accepted? I'd prefer not to have to beg my parents to co-sign but I'm worried I won't be accepted and I don't want to lose out on the downed stock market in paying off all credit card debt. Please help! Thank you.

Mr_Shiftright

Basically you are taking on more debt and betting that the stock market will continue to earn you some rather remarkable returns?

Sounds to me that, for the moment, your eyes are bigger than your resources. With a 65K salary, I don't see why you can't hammer away at the credit card debt before taking on an additional $350 per month for...what...3 more years?

Your stocks are only a "bet". That's not real money until you cash it in. That could be reduced by 25% in a matter of weeks, whereas your debt remains constant regardless.

Once you pay off your credit cards, you could start pecking away at the student loan, too. No reason why credit cards can't be kept down to $200-$300 a month through the course of your lease.

verdugo

I'm earning 25%+ in the market right now.

25% right now? Really? I don't buy it.

But that aside, I'm with Mr. Shiftright.

dtownfb

If he got into the market a couple of months ago, 25% is easily achievable. Is it sustainable? I doubt it and he shouldn't count on it either.

boomchek

From what it looks like on paper, you should be able to get approved. It is important that you had no recent lates or collections on your credit though.

Also it not only depends on total debt but how much are you obligated to it every month. If your expenses every month are a high percentage of your income them you might need a cosigner. Keep in mind the cosigner also has to have very good credit and have good debt service ratio.

Otherwise, the only other thing left to do is to actually go and try getting that lease. That's the only way you will know.

Good luck.

mcb345

Hey All,

Thanks for the help. I actually was approved for the lease without a problem after I was told I could still get a co-signer if I was denied. And yes I did just get in to the market a few months ago and yes it 25% returns may not be sustainable in the long run but 25% in two months lends one to want to gamble a bit more down the road. The DOW won't be staying in the low 8000's for long!

Kirstie_H

Shoot... that's easily doable. I earned 40% on the purchases I made at the end of November 2008 - just sold then this week. I knew it was time to get out.

Our stock club also bought 2000 Ford shares a few months ago at 1.93/share. Sold 1000 of them at 6.02, and the other 1000 at 4.86.

That said, I wouldn't view it as my sole or primary financial management strategy. While there are bargains to be had, it's too volatile - way more volatile than paying off existing debt!

greensuv

We now have an Affordability Calculator which helps you figure out the price range of the cars you should shop for based on your desired monthly payment: http://www.edmunds.com/apps/calc/CalculatorController?pmtcalAction=affordability- -

volvomax

Great!
Maybe that will keep people from looking at $30,000 cars when they want a $300/mo payment.